Building Wealth Starts with a Budget

Wealth only happens through intentional spending and saving. Let’s cover the basics of budgeting and how you can pinpoint a house payment that works for you to ensure you’re not getting in over your head.

A budget is just a plan dealing with two things—income and spending. Since spending and income rarely stay the same all year, you’ll want to make a budget for each month.

Making a budget is easy …

• List your income. Make sure to record your take-home pay, not your gross income. Don’t forget to include money from any part-time, seasonal, or side hustle jobs.
• Jot down your expenses. It’s also a good idea to put them into categories such as, utilities, debt, savings, etc. Subtract your expenses from your income.
• Make sure everything adds up to zero. The idea here is to track all your spending. Income minus expenses and monthly savings goal should equal zero.
• Pay off debt. If you finish your budget and have money left over, use it to pay off some debt or move it to an additional savings account (down payment fund, anyone?)

Industry guidelines suggest up to 43% of your gross monthly income go toward your mortgage. Remember, just because that’s standard it doesn’t mean you should let your mortgage eat up so much of your take-home pay. We recommend that no more than 25% of your take-home pay go toward your mortgage. Check out How Much House Can I Afford? to calculate your numbers.

If you want to see what your monthly mortgage payment means for your lifestyle, we recommend you give it a try first.

Think about your current rent or mortgage payment. If your new loan amount is going to be higher, put the difference into a savings account on the first of the month to simulate making your new mortgage payment. Once you’ve test driven your estimated payment, ask yourself these questions:

• Are you able to make the payment work?
• Are you giving up anything to make the payment?
• Could you continue to make that sacrifice long-term?
• Do you have enough money left over in your budget to enjoy your home and desired lifestyle?

If you’re good to work and everything falls into place, congrats! You now know you can handle the new monthly payment without any issues and you’re ready for your new mortgage.

Think about how much money you’d like to put toward your down payment. This will help you figure out which loan programs work best for you and your situation. There’s a wide variety of mortgage loan options that fit different needs so it’s important to take a look at all your options and talk to a Home Loan Specialist to find what works best for you.

Now that you’ve played around with the numbers and took your proposed budget on a test drive, you can move forward with confidence and to know that you’ll get a mortgage you won’t regret!